Fund Manager Summary
The fund managers believe the outlook for Lottery Corporation Ltd (TLC) is promising, presenting a significant investment opportunity. In their opinion, TLC's defensive business model is poised for reasonable earnings growth over the medium term, driven by population growth and product innovation. Although earnings may experience short-term volatility due to jackpot sequences, they expect TLC to provide consistent long-term returns. The fund managers are particularly attracted to TLC’s strong market position and its infrastructure-like characteristics, which offer a favorable comparison to other infrastructure investments due to its lower capital intensity. Additionally, they see potential for value creation through new lottery licenses in Australia and New Zealand.
Source: Trading View
Commentary From The Managers
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Blackwattle Investment Partners
30 Apr 2025
$5.22
Summary
- TLC was a significant contributor to performance in April, rallying 10% as investors sought defensive growth in uncertain economic conditions.
- TLC operates as the monopoly lottery operator for state lottery concessions in Australia, excluding Western Australia.
- Since being spun out of Tabcorp in 2022, TLC has been somewhat overlooked in the ASX, gaining attention primarily during record-breaking jackpots.
- The stock faced challenges due to a poor streak of jackpot luck, trading at mid 20s PE multiple for FY26 despite being a high-quality defensive compounder.
- Blackwattle Investment Partners continues to see significant upside for TLC as an enduring high-quality business.
- TLC is viewed as one of the highest quality franchises on the ASX, characterized by its defensive nature, monopoly status, pricing power, product innovation, and strong cash generation.
- The company benefits from structural digital tailwinds and capital optionality, enhancing its growth potential.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Managers
Blackwattle Investment Partners
30 Apr 2025
$5.22
- TLC was a significant contributor to performance in April, rallying 10% as investors sought defensive growth in uncertain economic conditions.
- TLC operates as the monopoly lottery operator for state lottery concessions in Australia, excluding Western Australia.
- Since being spun out of Tabcorp in 2022, TLC has been somewhat overlooked in the ASX, gaining attention primarily during record-breaking jackpots.
- The stock faced challenges due to a poor streak of jackpot luck, trading at mid 20s PE multiple for FY26 despite being a high-quality defensive compounder.
- Blackwattle Investment Partners continues to see significant upside for TLC as an enduring high-quality business.
- TLC is viewed as one of the highest quality franchises on the ASX, characterized by its defensive nature, monopoly status, pricing power, product innovation, and strong cash generation.
- The company benefits from structural digital tailwinds and capital optionality, enhancing its growth potential.
Summary
Equity Trustees Asset Management
31 Mar 2025
$4.76
- The Lottery Corporation was spun out of Tabcorp in 2022, with roots dating back to 1881.
- It operates lotteries across all states except WA and also manages Keno.
- Post-demerger, TLC has greater control over its cost base, which enhances revenue stability.
- This structure allows for operational leverage and the potential for increased revenue if the Victorian lottery license is renewed on more favorable terms.
- The stock's recent underperformance is attributed to less favorable jackpot outcomes, which are expected to normalize.
- Ongoing game changes are projected to drive additional revenue growth in the future.
Summary
Blackwattle Investment Partners
31 July 2024
$4.97
- Blackwattle Investment Partners continues to hold Lottery Corporation Ltd (TLC.AX) despite recent underperformance.
- The fund's positions in Consumer Discretionary detracted from overall performance, primarily due to stock selection within the sector.
- An overweight position in The Lottery Corporation underperformed compared to cyclical consumer peers and the broader market.
- Despite being a discretionary stock, its revenues are characterized as defensive and stable.
- Blackwattle remains confident in Lottery Corporation due to the resilience of its sales through various economic conditions.
- The firm's investment thesis is bolstered by expectations of long-term margin improvement as it increases online penetration.
- Continued game enhancements are anticipated to drive larger jackpots and enhance consumer interest.
Summary
Cooper Investors
30 Sept 2023
$4.65
- Cooper Investors built a position in The Lottery Corporation (TLC) during the September quarter.
- TLC falls within the Stalwart Subset of Value, indicating a defensive business model.
- Expectations for reasonable earnings growth are based on moderate top line growth driven by population growth and product innovation.
- Potential for margin expansion exists through improved product mix and operating leverage.
- Earnings may experience volatility in the short term, influenced by jackpot sequences.
- Long-term returns from TLC are anticipated to be consistent.
- The company's strong market position is a significant attraction for this investment.
- Lotteries exhibit infrastructure-like characteristics and have a lower capital intensity compared to other infrastructure opportunities.
- There is potential for further value creation through product innovation and new or expanded lottery licenses in Australia and potentially New Zealand.
Summary
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
ANALYST INSIGHT
Equity Research Analyst
"In a landscape of uncertainty, it seems The Lottery Corporation is positioned as a defensive play, promising steady growth and potential upside through innovation and market expansion. Its infrastructure-like stability could redefine how we view value investments in this sector."
Last Updated: 30 Apr 2025
Query The Data
Frequently Asked Questions
Who is investing in Lottery Corporation Ltd (ASX:TLC)?
Fund managers including Cooper Investors, Blackwattle Investment Partners and Equity Trustees Asset Management have invested in Lottery Corporation Ltd (ASX:TLC).
Why do fund managers invest in Lottery Corporation Ltd?
Fund managers invest in Lottery Corporation Ltd due to its defensive business model and potential for reasonable medium-term earnings growth driven by population increases and product innovation. The company's strong market position, characterized by infrastructure-like qualities and lower capital intensity, enhances its attractiveness. Additionally, opportunities for product innovation and expanded lottery licenses in Australia and New Zealand further support the investment rationale.
What happened to Lottery Corporation Ltd (ASX:TLC)?
There have been no recent updates from fund managers regarding Lottery Corporation Ltd although fund managers including Cooper Investors, Blackwattle Investment Partners and Equity Trustees Asset Management have previously commented.